How to Properly Catch a Falling Knife

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Always Look for Agreement with These Technical Indicators

I love when traders tell me technical analysis doesn’t work. 

While they’re entitled to be wrong, the fact remains that technical analysis does work, sometimes by up to 80% of the time. Granted, there is no Holy Grail, but if we use the right indicators, we increase our odds of success. Especially if we apply those indicators to well known stocks that may only be down temporarily.

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$90 Oil Prices: Why It Could Happen in 2018

For most of 2018, oil prices have churned higher.

Granted, prices took a short breather in early May through June 2018, but that proved to be short-lived on fears that supply won’t be able to offset issues.

In fact, since the middle of June 2018, oil ran from a los of $63.50 to $74 a barrel – its highest point in about four years thanks to OPEC’s underwhelming news of a smaller than expected increase in oil production.

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Three Reasons Small Caps are Booming

Small-cap stocks have been unbelievable this year, hitting new highs in June 2018.

In fact, the Russell 2000 is up 9% on the year through July 16, 2018. 

And that’s not likely to change any time soon for three reasons.

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Three Treacherous Technical Patterns on the Dow Jones

It is absolutely imperative that traders pay close attention to key technical patterns, especially when it could cost them thousands of dollars.

In June 2018, it was safe to say the market was in train wreck-mode.

In fact, on June 19, 2018, the Dow Jones fell more than 350 points on fears of trade war escalation with China. At the time, President Trump threatened to impose another $200 billion of tariffs on Chinese goods if Beijing follows through with its promise to retaliate against our first round of tariffs. 

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Engulfing Candlesticks: How to Spot Them and What They Mean

To the average trader, candlestick patterns are a bunch of crosses and odd shapes with bizarre names, like the three black crows, or the abandoned baby bottom. 

But as odd as they may sound, they can provide powerful insight into direction.

For example, one of the oddest ones is the doji cross. But if you spot one of these at top or bottom of trend, you may have uncovered an opportunity to trade a trend reversal. The profit stars, more commonly known as dojis, are commanding reversal signals. These are formed when the candlestick opens and closes at the same level, implying indecision in the stock price.

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The Importance of the Money Flow Index (MFI)

When it comes to trading, one of the best ways to tell what’s happening is by paying attention to the flow of money in and out of a stock. 

Surely, none of us want to buy a stock if money is flowing out, right? 

Instead, we want to buy if we’re seeing money flow in, or short if we begin to see signs that money is about to start flowing out of a stock.

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How to Spot Opportunity in Oil before Others Wake Up

Oil is still a fickle beast.

Prices may have slipped from a lofty high of $73 to about $64 in June 2018.  But the fear that sent prices lower may have been a bit overblown on news that Russia and the Saudis hinted they may boost oil production by up to a million barrels a day – ending the production freeze.

At the time, the Saudis boosted their daily output in May to the highest level since October, ahead of an OPEC meeting where they could propose raising production even higher, phasing out months of voluntary cutbacks. 

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How to Read Candlestick Charts: The Doji Signal

Learning how to read stock charts can be a very simple process. The major signals clearly illustrate trend reversals.  Most investors, when learning how to read stock charts, feel that they need a multitude of indicators on one chart.  Candlestick analysis does not require numerous indicators. When utilizing the major candlestick signals, chart analysis becomes very easy. The major signals reveal an immense amount of information. When learning how to read stock charts, the process should be as simple as possible.     

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Candlestick Analysis: The Spinning Top

Spinning Tops are depicted with small bodies relative to the shadows. This demonstrates some indecision on the part of the bulls and the bears. They are considered neutral when trading in a sideways market. However, in a trending or oscillating market, a relatively good rule of thumb is that the next days trading will probably move in the direction of the opening price. The size of the shadow is not as important as the size of the body for forming a Spinning Top.

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Trading Strategy: The Best Time to Buy Excessive Fear

The best time to buy fear is when there’s too much of it.

But who in their right mind can tell when there’s just too much?

Honestly, any one can.

You just have to know what you’re looking for with over-extensions on the Volatility Index (VIX) along with its upper Bollinger Band (2,20) and Williams’ %R.

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Three of the Most Consistent Candlestick Patterns

When Munehia Homma first created candlestick charts in they 1700s, he had no idea it’d change the way we look at stocks 300 years later.

To him, candlestick charting was meant for the rice trade.

He’d record the opening day’s price of rice, the low and the close. And over time, he’d begin to see price patterns in his recordings, mapping out repetitive signals in the price bars. He’d soon give them names, like spinning tops, dojis, and hanging man – candlestick names we still use to this day. The discovery of such patterns helped him successfully predict future direction of rice prices, giving him a significant advantage over other traders.

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The No.1 Problem Most Traders Have

At times, we forget to see the forest for the trees.

Even though market chaos erupted over Syria and fears of a trade war in early 2018, we often forget that markets are quite resilient, especially when the economy is still strong.

We witnessed this in early 2018.

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